SupposeAlcatel-Lucent has an equity cost of capital of 9.6%, market capitalization of $9.49, billion, and an enterprise value of $ 13 billion. SupposeAlcatel-Lucent's debt cost of capital is 5.9% and its marginal tax rate is 33%

a. What isAlcatel-Lucent's WACC?

b. IfAlcatel-Lucent maintains a constantdebt-equity ratio, what is the value of a project with average risk and the expected free cash flows as shownhere:

Year 0 1 2 3

FCF ($ million) -100 47 103 75

c. IfAlcatel-Lucent maintains itsdebt-equity ratio, what is the debt capacity of the project in part (b)?